NEW ORLEANS – The Biden administration’s new limits on the fossil fuel industry are raising alarms in the Louisiana business community because, as Tulane University’s Eric Smith said, “oil and gas is virtually in every phase of our economy – and it’s very unwise to be screwing around with the base feedstock.”
The state’s oil and gas industry, which officially began in 1901 when oil first erupted from a well near Jennings, has evolved over the last 120 years into a great number of endeavors that fall into three categories: “Upstream” activities include exploring, drilling and extracting oil and natural gas. Midstream operations transport and store those materials. Then, all the way downstream, companies process the oil and gas into new products and sell them to other businesses or consumers.
The industry is estimated to employ roughly 250,000 Louisiana workers and it contributed $73 billion to the state gross domestic product in 2019.
Smith, who is Tulane’s media spokesman for energy issues and is the energy committee chairman for the World Trade Center of New Orleans, said policy changes aimed at addressing climate change could hurt all three stages of the process in Louisiana – but perhaps the downstream activities worst of all because they rely on a steady supply of oil coming in from deep waters off the state’s coast.
“It’s fortunate for Louisiana in general but unfortunate right now that we have a heavy presence in the downstream oil refining business and particularly the ammonia fertilizer business and the plastics business,” said Smith. “Louisiana by itself provides about 30 percent of U.S. ammonia fertilizer production … so we’ve got a lot to lose.”
In general, Smith said, oil and gas is so much more than just oil and gas.
Heavy crude oil, for instance, can become gasoline, diesel fuel and jet fuel. The lighter stuff, meanwhile, is used by the petrochemical industry to create plastics, fertilizers, medicine and about 6,000 other everyday household products, including aspirin, soap, eyeglasses and tires.
“Hydrocarbons are in everything we do,” he said. “I know it’s popular not to like them right now, but if you are wearing underwear, there’s elastic in the waistband – and where do you think that came from? If you are sitting at a desk and it’s got a plastic top, where do you think that came from? How about the carpet you are walking on? And you can just go around the room. … Where do you think the lights are coming from?
Smith, while not a fan of the new Biden rules, believes the industry does need to address environmental concerns.
“We need to worry about downstream CO2 emissions and that, of course, is what the governor’s Resilient Louisiana Commission is all about: trying to figure out how to keep the plants running while gradually emitting less CO2 over time.”
Smith is a member of Gov. John Bel Edwards’ commission, which includes energy experts, business leaders, farming experts, Native American tribes and other stakeholders.
“We also have to decide how much fertilizer and plastics the world needs to help figure out how many more liquefied natural gas plants are needed,” he said. “We have people on the team focusing on natural systems to absorb carbon dioxide in the marshes and swamps of Louisiana. The goal is for the net emission to be zero by 2050.”
Smith, it’s important to note, believes climate change is a real problem but he thinks the dangers are being oversold for political reasons. In this way, he couldn’t disagree more with his Tulane colleague Oliver Houk, an environmental law scholar who said it’s long past time for the country to prioritize green energy sources and that the oil and gas industry “has to go.”
“I’m not denying that there’s global warming going on or that we’re contributing to it,” he said. “But I’m saying it’s been oversold. There’s that saying: ‘Never let a good crisis go unused.’ I think we should be trying to reduce the amount of C02 we emit and certainly to reduce the amount of smog-causing chemicals like sulfur oxides and nitrous oxides. And we’re working on that and we have reduced them and will continue to do that, but I don’t think we need to destroy the U.S. economy, particularly the energy-intensive economies like Louisiana’s, because of that trend.”
Smith said government and business need to collaborate on plans to reduce carbon dioxide emissions in a “deliberate fashion – and when we do it we need to get the rest of the economy to adjust to the higher prices that will inevitably result.”
He also argues that wind and solar energy aren’t as clean as people think.
“You hear a lot of people say that wind and solar don’t produce C02,” he said. “But that’s not quite the story. You produce an enormous amount of C02 when you’re making the towers, blades and turbines and all of the parts that go into the wind tower. And, quite frankly, when you look at the whole life cycle you have heavy CO2 emissions when you take the blades back to their elemental components and reuse the steel.”
Overall, said Smith, “I’m not being confrontational I don’t think. I’m simply saying you need to think through these changes and look beyond what two politicians said yesterday. You have to think about what else is going to be affected ten steps down the road. If you do certain things at the wellhead, you will see it in products in the grocery store.”
The way the price of oil affects the price of gas is easy for everybody to understand, he said. But there are plenty of other examples.
“When your dentist gives you a toothbrush, you are paying for these hydrocarbons that have been through this whole development effort to make it,” he said. “And if the dentist ends up paying more for the toothbrush, I guarantee you’re going to end up paying more for your dental care.”
Related:
Environmental Law Scholar Says Oil and Gas Industry ‘Has to Go’
Related: Expert Says Market, Not Policy, Will Change Louisiana Energy Industry
